Netflix Investors Reap Big after Long Term Investment

Given the rate at which market volatility has recently picked up pace, it’s always great to have a look back at some of the stocks which have been the most rewarding all through the hurdles.

In truth, not many stocks have been able to brave the storm and come out the other end victorious. Netflix just happens to be one of the companies that have been imperious in their performance.

From the onset, the company’s 1990’s early beginnings set it on the path of dethroning video rental stores and cinemas.

During the nascent stages of development, Netflix was never really bullish. It’s just one of those things that takes time to happen. Their business model was all about issuing DVD rentals via mail based on a monthly subscription. By design, the system managed to keep the company afloat long enough for technology to breathe a new lease of life into its operations.

At present, Netflix makes a killing thanks to the digital streaming concept and their rewarding venture into the content creation niche. This two-pronged approach has made them endearing to the hearts and minds of many people all around the world.

For investors, the recent turn of events has been nothing short of a boon. Unbelievably, the greatest beneficiaries are not just those who were there from the launch of its IPO. Long before that happened, the company had already started making ripples in the entertainment scene with its slew of DVD deliveries.

In fact, by February 2007, the company made a milestone with its billionth DVD delivery. Investors who chipped in their pennies at that point in time were exposed to the potential of 46 percent compounding interest. How significant is this number? Well, to really get the gist of things, one has to consider that back then, this figure was about 5 times the net return for the S&P 500.

While it’s true that the company was already a household name in that era, there were still a couple of stumbling blocks that investors had to brave before they made their monies.

The Qwikster Fiasco

Netflix has now become a mainstay in many households

The adoption of the streaming technology was not an immediate hit. Things started to go downhill in July 2011 when Netflix decided to let go of their classic service, the DVD mailing business, in a bid to focus on the streaming service.

Once word went round about the change, the company lost subscribers en masse. Customers simply didn’t seem to resonate with the new way of doing business. At one point, the unsubscription rate was so high that about 800,000 customers marched out in a single quarter.

Having witnessed customer displeasure, the company’s CEO, Reed Hastings, set out to clam the fires. Their strategy involved doubling down on the error by rebranding the DVD service under the “Quickster” moniker. Brilliant as the idea was in the boardroom, the people at Wall Street simply didn’t love the new approach.

By the time Hastings got about to apologize for the error in his ways, the bleeding was already too much. By the end of the year, the company’s stock had depreciated so much that its value took a clean 75% hit.

At that point in time, it’s safe to say that investors were not really pleased with the company’s performance. Those who stuck around during this phase were the ones who’ve benefited the most today. In review, investors who purchased $1000 of Netflix stock during the Qwikster fiasco would currently be sitting pretty with $28,000.

Big Moves

Analysts believe that the masterstroke occurred once Netflix embraced the idea of content creation.

Netflix originals like “Orange is the New Black” and the “House of Cards” have been embraced by the masses so much to a point where a Netflix subscription has almost become a must-have.

With the new approach, Netflix stopped being regarded as just another way to how people stream movies, to giving other big media conglomerates like HBO and Hulu a run for their money. Just this year, the company’s valuation managed to surpass industry bigwigs like Comcast and Disney. All this despite the fact that in 2017, the company’s $11 billion revenue representing a mere fraction of what other powerhouses brought home.

Indeed, Netflix has come a long way. It’s easy to reflect through the glasses of tunnel vision and contemplate just how lucky investors who stuck by the company through the times have been. However, it’s also important to also take note of the fact that about 30% of the company’s stock has taken a hit after hitting great highs just a couple of months ago.

There are also a couple of other issues that are dragging the company down. The most potent of them is whether the company will be able to ride the waves now that it streams to more than 190 people world over. With stocks, it’s all about the waiting game.